Wednesday, August 12, 2009

The Market Direction

As the Nifty goes through a correction of the uptrend, a serious question comes to mind: Are we in a bull market or was the upmove (from 2200 to 4700) a correction in an ongoing bear market?

The bear market, for me, ended at 2200 where the Nifty made a final low. Of course, we did not know then that the down move is over. But, as the Nifty started edging up, breaking out of one resistance or the other, we were buying the breakouts.

A bull market starts with a lot of base building. This has not happened with the current rally which took off in a V shaped upswing. I do not classify the uptrend as a long term bull market. I am just calling it an uptrend. The naming of the market waves helps because it allows focus on the direction of trading.

As I write today, the Nifty is in a trading range. We can define the range in different ways. The largest, safest is the band between 3900 to 4730. A trending move may come in only above 4730 and below 3900. Inside the range, we will have to watch the shorter term trend to get trading setups. Being inside a range is frustrating. But, the market does what it wants. It does not give us profits on demand. We have to adjust our strategies to the Market's current behavior.



Nifty Addict said...

Your Blog is a great place to in daily morning.All the best for you to continue your matured market views.
Best Wishes

Girish said...

Thanks for highlighting the "Frustration" for a trader, when the market's in a range.

Personally, I like positional trades since I don't necessarily have to look at the markets every hour. However, markets change direction intra-day and sometimes (like yesterday 12-Aug afternoon) necessitate a change in direction of the trade as well (Which means I wear an intra-day trader's hat, right ??).

I was short on Nifty and had I not closed my positions at 4400, I'd have only myself to blame :)

How do you suggest I handle such situations ? Look forward to your response.

Thanks in advance,

men said...

Mr. Sudarshan, I request you to give updates regularly as you are speaking your mind out. Missed your views today. Thanks.

TOOCOOL7610 said...

dear sudarshan ji

i am a new learning trader as i have mentioned it erlier. kindly show me the way by telling something about how to identify a high low on 5 min chart , i am working on a trading theory ,which needs to identify hi lo as mkts make it to trade please tell characteristics of highs and lows on 5 min , hoping for ur response.

thanking you

Viral Rajnikant Dholakia said...

Dear Girish,

The only option for you could be to continue with your positional trades without any need of wearing intra-day hat.

Caveat being, since you're positional trader you should also have pre-determined Stop loss for your trades.

And that you may need to feed in those stop loss (or for that matter even your targets) every morning into the system. Than you move on with your regular work without tensions of intraday volatility.

But, for that you must have deep insight into the determination of stop loss levels that you would need to observe & conviction to go with those levels (come what may in the market during the day).

Also, that will call in for more strategic use of trades on your side. Suppose you would have been stuck on the screen for the day in protecting your trading positions- may be your decisions would have been dictated by 'Emotions' at some point in time.

Not just that, if you have clarity as regards levels for fresh trades, you can also put trigger levels to buy/sell at morning itself, apart from just stop loss levels for your existing trades.

Well, somewhere in between lies your answer. Hopefully, Mr SS will explain in a sweeter/shorter/better/different language.

CHANDU said...

S we are in a a trading range and frustration not yet the end of the range we will get panic and at the highs we will get euphoria.this trading range looks like 2500--3000 range.what we had few months ago.This time trading breakout gives very good my opinion to start a new bull market we should breakdown from the range and we should start base building for new bull market.Because if we break 4700 and testing 5000 is a caution.this type of run can take us in to long term bear market.we must consolidate at tlower range to reach more than 6300.

wildeazoscar said...

A Quote from the Bible(i.e. Edwards and Magee):
"Finally, it must be said that, in rare cases, a Head-and-
Shoulders Top is confirmed by a decisive neckline penetration and
till prices do not go down much farther. "False moves" such as this are the most difficult phenomena with which the technical
analyst has to cope. Fortunately, in the case of the Head-and-
Shoulders, they are extremely rare. The odds are so overwhelmingly
in favor of the downtrend's continuing once a Head-and-
Shoulders has been confirmed that it pays to believe the evidence
of the chart no matter how much it may appear to be out of accord
with the prevailing news or market psychology."( Such an once in Blue Moon event occured with the Bouce Back from 3919)

Now i continue with the Quote:
"There is one thing that can be said and is worth noting about
Head-and-Shoulders formations which fail of completion or
produce false confirmations. Such developments almost never
occur in the early stages of a Primary advance. A Head-and-
Shoulders which does not "work" is a warning that, even though
there is still some life in the situation, a genuine turn is near. The next time something in the nature of a reversal pattern begins to appear on the charts, it is apt to be final." (And a DOW Signal is occuring if 4359 is breached on the downside)

With the highest probability, we are going to eat out 2200 by this december itself.

The Debt Bubble worked itself out, and NIFTY is going to revisit 550.

I would love to see your views on that.